Congressional Republicans are eying tax increases on certain colleges’ endowment revenue amid President Donald Trump’s broader pressure campaign on universities to crack down on antisemitism that has been allowed to fester on campuses.
GOP lawmakers are considering several pieces of legislation that would raise the 1.4% tax rate on elite universities’ endowment profits and expand the number of private colleges’ endowments that are covered by the tax. The revenue-generating proposals come as congressional Republicans mull various options to help offset the cost of Trump’s legislative priorities in a massive tax and spending package that Congress is currently negotiating.
An endowment is a collection of donated assets invested by a university to provide for its mission in perpetuity. American universities oversee vast sums of wealth — roughly $873 billion in endowment assets in 2024 — that they are committed to growing.
Harvard University, the world’s wealthiest college, had an endowment of roughly $53 billion in fiscal year 2024, which roughly equals the total size of the Middle Eastern country of Jordan’s economy and surpasses the GDP of roughly 100 countries. Despite Harvard’s endowment growing by $2.5 billion in fiscal year 2024, the university’s endowment profits paid the federal government only $45 million in taxes.
Just under half of universities’ endowment spending in 2024 funded financial aid, according to data from the National Association of College and University Business Officers (NACUBO) and the asset management firm Commonfund.
Harvard’s endowment is made up of more than 14,000 individual funds of which more than 80% have specific restrictions on how they can be spent. The university’s endowment distributions devoted $749 million to financial aid in fiscal year 2024, which was less than a third of its total endowment spending for that year.
Some Republican lawmakers have justified levying additional taxes on large endowments because some campuses have allowed antisemitism to proliferate and elite universities have in part used their massive wealth to fund left-wing ideology.
A January 2024 poll by Echelon Insights found that roughly 50% of voters would support legislation that tax private universities’ endowments. Just 20% of voters said they would oppose the legislation.
Congressional Republicans first took aim at elite universities’ colossal endowments in 2017 by levying a 1.4% excise tax on certain wealthy colleges’ net investment earnings in a Trump-backed budget package. The tax on universities’ endowment profits does not expire and is a permanent part of the tax code.
The tax on endowment income currently applies to universities with endowment assets worth $500,000 or greater per student. Just 56 universities paid the endowment tax in 2023, raising roughly $380 million in revenue for U.S. government coffers.
Congressional Republicans are seeking to enact an extension of the expiring provisions of the 2017 Trump tax cuts as part of the sweeping Trump-backed tax and spending package that allows the GOP-controlled congress to circumvent Democrats’ opposition by passing legislation by a simple majority vote.
GOP lawmakers are considering potential sources of revenue and steep spending cuts to help pay for some of the president’s tax policies. The cost of extending the expiring provisions of the 2017 tax cuts is roughly $4 trillion over a ten-year period, according to the Bipartisan Policy Center. Congressional Republicans are also considering the president’s other tax priorities, including enacting no taxes on tips, overtime pay and Social Security benefits, as well as raising the state and local tax deduction cap.
Republican Texas Rep. Troy Nehls’ Endowment Tax Fairness Act would raise between $70 billion to $112 billion in additional revenue over a ten year period depending on future endowment investment return rates, according to analysis from the Tax Foundation.
His bill would raise the excise tax imposed on certain universities’ endowment investment returns from 1.4% to 21% — the same rate that for-profit corporations pay. Nehls told the DCNF that he is pushing for his bill to be included as a provision in the anticipated tax and spending bill.
“Certain elite private universities have accumulated and sit on massive endowments yet pay a tax less than 2% on the investment earnings of their endowments, far lower than what most hardworking Americans pay in taxes,” the congressman told the DCNF. “My bill, the Endowment Tax Fairness Act, would provide parity by increasing the excise tax levied on their endowment profits to 21%, the same rate corporations pay on their investment income.”
Other legislative proposals would expand the number of colleges required to pay the endowment tax.
Republican Florida Rep. Vern Buchanan’s Protecting American Students Act would expand the scope of universities covered by the endowment tax by excluding students who are noncitizens from the endowment tax calculation. Buchanan’s office estimates that an additional 10 to 12 universities’ endowments, including Columbia University and Cornell University, would be subject to the excise tax if his bill is signed into law. All of these schools’ endowments are at least $750 million, according to Buchanan.
“I am committed to working alongside President Trump to craft an ‘America First’ tax code — one that puts American students and families first while ending generous tax breaks for institutions that refuse to do the same,” Buchanan told the DCNF in a statement. “I also fully support President Trump’s efforts to hold so-called ‘elite’ universities accountable for allowing anti-American and pro-terrorist voices to spread hate and violence on college campuses.”
Similarly, Republican New York Rep. Mike Lawler’s Endowment Accountability Act would ensure that more universities pay the tax on investment returns by lowering the per-student endowment ratio from $500,000 to $200,000 per student. Lawler’s bill would also raise the tax rate on certain universities’ endowment profits by 8.6%.
“If these institutions aren’t using their resources to lower tuition, expand financial aid and improve student services, then they should be paying their fair share,” Lawler said in a press release in February.
Less than half of universities’ endowment spending went to student financial aid, according to fiscal year 2024 data from the National Association of College and University Business Officers and the asset management firm Commonfund.
Speaker Mike Johnson has floated an ambitious timeline of sending a Trump-backed tax and spending bill to the president’s desk by Memorial Day. Trump has referred to the forthcoming legislation as “one big, beautiful bill.” Three offices with knowledge of the tax portion of the budget reconciliation package told the DCNF that all options remain on the table regarding a potential expansion of the university endowment tax in the bill.
Some conservative economists view raising the tax on endowment profits as a no-brainer for congressional Republicans.
“There are at least a dozen schools bulging with $10 billion endowments and scores more with more than $1 billion,” Stephen Moore, Heritage Foundation senior fellow and cofounder of Unleash Prosperity, wrote in an op-ed for the Daily Caller News Foundation in March. “We should call these schools Loophole U … [e]ven with these giant endowments, college tuition has been rising at two to three times the rate of inflation. The argument that tax-free donations make colleges more affordable has proven to be patently false.”
“Colleges need to pay their fair share, and the revenues should be used to help pay for the Trump tax cuts – which benefit everyone,” Moore added, characterizing elite universities as “the richest institutions in the world that go untaxed.”
Editor’s Note: This story has been updated to reflect more detail about university endowments.
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